Colorado trial could affect US marijuana industry

Updated October 28, 2018 - 7:46 pm

DENVER — A federal trial in Colorado could have far-reaching effects on the United States’ budding marijuana industry if a jury sides with a couple who say having a cannabis business as a neighbor hurts their property’s value.

The trial set to begin Monday in Denver is the first time a jury will consider a lawsuit using federal anti-racketeering law to target cannabis companies. But the marijuana industry has closely watched the case since 2015, when attorneys with a Washington, D.C.-based firm first filed their sweeping complaint on behalf of Hope and Michael Reilly.

One of the couple’s lawyers, Brian Barnes, said they bought the southern Colorado land for its views of Pikes Peak and have since built a house on the rural property. They also hike and ride horses there.

But they claim “pungent, foul odors” from a neighboring indoor marijuana grow have hurt the property’s value and their ability to use and enjoy it.

“That’s just not right,” Barnes said. “It’s not right to have people in violation of federal law injuring others.”

An attorney for the business targeted by the suit plans to argue the couple’s property has not been damaged, relying in part on the county’s tax valuations of the Reillys’ land ticking up over time.

Vulnerability to similar lawsuits is among the many risks facing marijuana businesses licensed by states but still violating federal law. Suits using the same strategy have been filed in California, Massachusetts and Oregon.

Mirroring the Reilly complaint, several claim the smell of marijuana damages neighboring owners’ ability to enjoy their land or harms their property value.

The question now is whether jurors accept the argument.

“They can claim a $1 million drop in property value, but if a jury does not agree and says $5,000, that’s not that big of a deal,” said Rob Mikos, a Vanderbilt University law professor who specializes in drug law. “That’s why there are a lot of eyes on the case.”

Congress created the Racketeer Influenced and Corrupt Organizations Act — better known as RICO — to target the Mafia in the 1970s, allowing prosecutors to argue leaders of a criminal enterprise should pay a price along with lower-level defendants.

But the anti-racketeering law also allows private parties to file lawsuits claiming their business or property has been damaged by a criminal enterprise. Those who prove it can be financially compensated for damages times three, plus attorneys’ expenses.

Starting in 2015, opponents of the marijuana industry decided to use the strategy against companies producing or selling marijuana products, along with investors, insurers, state regulators and other players. Cannabis companies immediately saw the danger of high legal fees or court-ordered payouts.

That concern only grew when a Denver-based federal appeals court ruled in 2017 that the Reillys could use anti-racketeering law to sue the licensed cannabis grower neighboring their property. Insurance companies and other entities originally named in the Reillys’ suit have gradually been removed, some after reaching financial settlements out of court.

The case focuses on property in Pueblo County, where local officials saw marijuana as an opportunity to boost an area left behind by the steel industry. Most Colorado counties ban outdoor grows, forcing pot cultivators to find expensive warehouse space.

Pueblo officials positioned their sunny, flat plains as the alternative. They created financial incentives in hopes of drawing growers to outdoor fields or cavernous buildings left vacant by other industries.

Parker Walton was among the early comers, buying 40 acres in the rural town of Rye in 2014.

Barnes said the Reillys made three separate land purchases between 2011 and 2014, gradually reaching more than 100 acres. They learned about plans for the marijuana business bordering their final purchase four months after completing the sale, he said.

Walton put up a 5,000-square-foot (465-square-meter) building to grow and harvest marijuana plants indoors. The Reillys filed their lawsuit in early 2015. A year later, Walton announced the company’s first harvest via Instagram, snapping a photo of a strain dubbed “Purple Trainwreck” hanging to cure in a dim room.

Fewer than five people including Walton work for the company, which sells its products to retail stores, his attorney, Matthew Buck said.

Buck said he’s confident jurors will decide the Reillys’ property has not been harmed. Buck warned, though, that defending against a similar lawsuit comes at a high cost for marijuana businesses while plaintiffs with support from a large law firm have little to lose.

Cooper & Kirk, the firm handling the couple’s suit, has a conservative reputation, including a founding partner who worked for the U.S. Justice Department during the Reagan administration. Barnes said members of the firm were “troubled” as states began legalizing the adult use of marijuana because of the inherent conflict with federal law, and they brainstormed legal strategies.

Walton created a website this month to raise money for his defense. He wrote that a loss could jeopardize “all legal cannabis operations in all states.”

But some lawyers who have defended companies in similar lawsuits said those fears are overhyped.

Adam Wolf, a California attorney, said he believes the suits are primarily intended to scare third-party companies into cutting ties with marijuana firms or persuading cannabis companies to shut down. But long-term, Wolf said the U.S. Supreme Court has curtailed lawsuits making civil racketeering claims against other industries.

Courts could apply the same logic to cannabis, he argued.

“What the plaintiffs seemed to be saying is anybody who touched, in any matter, any marijuana business is potentially liable,” Wolf said. “And that is a soundly rejected argument by the courts.”

Barnes, though, said the number of racketeering lawsuits awaiting action suggests attorneys with no ties to his firm believe in the strategy.

———

Kathleen Foody is a member of AP’s marijuana beat team. Follow her at twitter.com/katiefoody

Find complete AP marijuana coverage here:apnews.com/tag/LegalMarijuana

ad-high_impact_4
News
Three Square helps TSA workers
Three Square Food Bank donated over 400 care bags to TSA workers affected by the government shutdown Wednesday, filled with food, personal hygiene products and water.
Las Vegas furniture store donates to Clark County firehouses
Walker Furniture donated new mattresses to all 30 Clark County firehouses in the Las Vegas Valley, starting today with Station 22. (Mat Luschek/Las Vegas Review-Journal)
Mount Charleston Gets Heavy Snow, Fog
Mount Charleston saw heavy snow today, and fog in lower elevations as a cold front swept across the Las Vegas Valley. (Benjamin Hager/Las Vegas Review-Journal)
Krystal Whipple arrested in Arizona
Krystal Whipple, charged in the killing of a Las Vegas nail salon manager over a $35 manicure, is expected to return to Nevada to face a murder charge.
Holocaust survivor on acceptance
Holocaust survivor Celina Karp Biniaz, who was the youngest person on Schindler’s List, talks about the most important message for people to understand from her life and experiences.
Holocaust survivor speaks about telling her story
Holocaust survivor Celina Karp Biniaz, who was the youngest person on Schindler’s List, tells of opening up about her experiences during Sunday’s event at Temple Sinai.
Jesus Jara State of the Schools address
Clark County School District Superintendent Jesus Jara delivers his State of the Schools address on Friday, Jan. 11, 2019. (Amelia Pak-Harvey/Las Vegas Review-Journal)
Michael Naft sworn in to Clark County Commission
Michael Naft, chosen by Gov. Steve Sisolak to be his replacement on the Clark County Commission, was sworn into office on Wednesday, Jan. 9, 2019. (Shea Johnson/Las Vegas Review-Journal)
CES Opening Party in Omnia Nightclub at Caesars Palace
CES conventioneers packed Omnia Nightclub at Caesars Palace, and let loose as they danced to DJs into the night. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Las Vegas police piecing together details of fatal shooting
Six hours after the fact, Las Vegas homicide detectives worked to reconstruct the scene of a shooting early Jan. 7 that left one man dead in the southeast valley. (Rio Lacanlale/Las Vegas Review-Journal)
Dyer Lawrence explains college football playoff system proposal
Las Vegan Dyer Lawrence has a new idea for a college football playoff system that includes a unique scheduling component called National Call Out Day. (Ron Kantowski/Las Vegas Review-Journal)
Death row inmate Scott Dozier found dead in his cell
Nevada death row inmate Scott Dozier is dead. Dozier’s death ends his legal odyssey, which began in 2007 when he was convicted in the 2002 murder of Jeremiah Miller, but does little to clarify what’s next for Nevada’s death penalty.
I-15 southbound near Primm closed after ‘major crash’
A rollover crash Saturday morning involving at least nine vehicles on southbound Interstate 15 near Primm caused an hourslong traffic delay. Traffic was backed up to Sloan, live traffic cameras show. (Rio Lacanlale/Las Vegas Review-Journal)
Death Valley visitors deal with shutdown
Visitors staying at the Furnace Creek Campground were forced to move from the campground following health and safety concerns due to lack of resources during the partial government shutdown at Death Valley National Park in Calif., on Friday, Jan. 4, 2019. Richard Brian Las Vegas Review-Journal @vegasphotograph
Half of homicides in Henderson for 2018 domestic violence related
Lt. Kirk Moore of the public information office of the city of Henderson police department speaks to the Review-Journal in Henderson, Thursday, Jan. 3, 2019. Henderson saw a slight increase in homicides in the past year. (Rachel Aston/Las Vegas Review-Journal)
Governor-elect Steve Sisolak stops by Las Vegas Boys and Girls Club
Governor-elect Steve Sisolak kicks off his tour to Carson City, which will take him from Las Vegas, through Tonopah, and up to the capital city. First stop is the Downtown Boys & Girls Club.
Certificates for renewing wedding vows in Clark County
The Marriage License Bureau in Clark County began issuing a Certificate of Vow Renewal to married couples who are renewing their wedding vows on Jan. 3, 2019. (Shea Johnson/Las Vegas Review-Journal)
Las Vegas flu season better than last year (so far)
Dr. Fermin Leguen, chief medical officer and director of clinical services at the Southern Nevada Health District, said there were 24 flu-related deaths at this point in the flu season. No deaths have been reported so far this year. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
The Las Vegas Valley’s First Baby of 2019
The first 2019 baby in the Las Vegas Valley was Melialani Chihiro Manning, born at 12:10 a.m. at Henderson Hospital. (Briana Erickson/Las Vegas Review-Journal)
Las Vegas NYE Fireworks - VIDEO
The full show: A spectacular view from the rooftop of the Trump International Hotel as 80,000 pyrotechnics illuminated the Las Vegas Strip at the stroke of midnight. Fireworks by Grucci choreographed launches from the Stratosphere, the Venetian, Treasure Island, Caesars Palace, Planet Hollywood, Aria and MGM Grand.
Snow in Henderson on New Year's Eve morning
Light snow flurries in Anthem Highlands in Henderson on Monday morning, the last day of 2018.
Sources: Henderson Constable may face more charges
Henderson Constable Earl Mitchell may face additional charges ... stemming from his spending of county funds, sources said. Mitchell was indicted earlier this month on five felony theft and fraud charges ... after a Las Vegas Review-Journal story questioned his spending. But grand jury records show even more extensive spending including ... an $800 dinner at steakhouse ... nearly 200 atm withdrawals mostly at gambling establishments ... and even Disneyland tickets. But his attorney plans to ask a judge to dismiss the charges.
Las Vegas NYE Restrictions and Enhanced Security
If you are planning to celebrate New Year's Eve on the Las Vegas Strip or Fremont Street, be aware that you are not allowed to bring backpacks, coolers, strollers or glass. There will also be an increase in security to ensure safe celebrations across town.
Catholic Charities serves up 53rd annual Christmas dinner
Catholic Charities of Southern Nevada and more than 100 volunteers served 1,000 Christmas meals to Southern Nevada's homeless and less fortunate. (K.M. Cannon Las Vegas Review-Journal @kmcannonphoto)
Henderson couple adds another school to their generosity
Bob and Sandy Ellis of Henderson, who donate to several Clark County School District schools, have added Matt Kelly Elementary in Las Vegas to their list of schools where every student gets new shoes, socks and a toy. (K.M. Cannon/Las Vegas Review-Journal)
Jeffrey Martin Added To Nevada's Black Book
Martin was one of four men convicted of theft and cheating at gambling in 2016 in Clark County District Court and sentenced to prison. The Nevada Gaming Commission voted unanimously Thursday to include Martin in the black book.
Raiders Stadium Timelapse
Construction on the new Raiders stadium continues in Las Vegas.
Buffalo Wild Wings security video
Security footage from a Buffalo Wild Wings restaurant in southwest Las Vegas captured a driver who repeatedly crashed into a vehicle in a failed attempt to squeeze into a tight parking spot.
The Magical Forest at Opportunity Village
Opportunity Village's Magical Forest added 1 million lights and a synchronized music show visible from all over the forest this year. The holiday attraction, which began in 1991, has a train, rides, food and entertainment along with the light displays. (Heidi Knapp Rinella/Las Vegas Review-Journal)
Navigating the new I-515 southbound to 215 Beltway ramp configuration
After opening at 5 a.m. Tuesday, Dec. 18, 2018, the new Interstate 515 southbound to the 215 Beltway westbound freeway ramp configuration caused confusion amongst motorist. Here’s how to navigate the new ramp. (Mick Akers/ Las Vegas Review-Journal).
TOP NEWS
News Headlines
Home Front Page Footer Listing
Circular
You May Like

You May Like